Thank you for holding this oversight hearing on the Legal Services Corporation (LSC), Mr. Chairman. With your permission, I will make only a short oral statement and would ask that my entire statement be entered into the record. I must stress , however, that the views I express are entirely my own, and should not be construed as representing any official position of The Heritage Foundation.

Every day Congress makes decisions on how much scrutiny, how much money or how much reform is needed for existing federal programs within this $1.7 trillion dollar federal government. Many people don't know that when Congress is not passing laws or spending money it is-or should be-holding hearings and conducting investigations that ask tough questions of federal agencies and their use of taxpayer dollars. These hearings and investigations, known as congressional oversight, are perhaps the single most important feature of the "checks-and-balances" envisaged by the Founders to guide the direction-and therefore the accountability-of the federal government and its many agencies and endeavors. And when oversight is conducted properly, oversight of federal agencies can lead to real and positive change.

LSC's Performance Data Collapsing Under Scrutiny

If ever there was a compelling need for improved accountability for the use of taxpayer funds, LSC is such a case at this point in time. Since 1974, taxpayers have spent $6 billion on legal aid to the poor. Thanks to the courage of a few principled individuals who worked at LSC only until they realized that they were part of a numbers charade, we all now know more about LSC's real performance. With new scrutiny, Congress found that LSC served less of the nation's poor than LSC had previously boasted to the public. As recently as March of 1999 when it was requesting a $40 million increase in its budget, LSC claimed to have served 1,932,613 poor in 1997. Yet, every program or grantee that has been audited has demonstrated serious miscounting or over-counting of cases.

Information from the LSC's Inspector General's office found that of 6 programs reviewed, nearly two-thirds of their reported cases were inaccurate.

GAO reported in a June, 1999 audit that one- third of reported cases were overstated in five of the largest grantees.

This month, the IG released 3 more audits. Grantees in Philadelphia, Monroe County, New York and Maryland continued double-counting cases, omitting verification of citizenship or eligibility in case files, and even reported phantom cases.

And, the 1998 figures are still not public - although they typically would be published in May, 1999. These figures are now 4 months late to the Congress. We know LSC didn't serve 1.9 million people in 1997. One would assume that the 1998 figures would be below 1.9 million as well, but Congress should have that information prior to the taxpayer making additional appropriations being made to LSC from the taxpayer.

One might be able to chalk the errors up to bureaucratic bungling had we not seen LSC take quiet remedial steps to solve their case statistics problem in late 1998. At the same time, no mention of this over-counting problem was made to Congress until publicity intensified after a March 1999 House appropriations subcommittee hearing and an Associated Press story broke on April 8, 1999. My lengthier Backgrounder that is attached for the record documents the unchallenged facts and timetable as to when LSC knew they had a problem, and when they revealed it to the Congress. It would appear that there remains much to find out about the 1997 and 1998 case statistics and the use of taxpayer dollars; however, as stated earlier, every case audited has revealed significant over-counting and mis-reporting.

Performance-based Governing is a Bipartisan Effort

When Congress passed the Government Performance and Results Act in 1993, it codified the desire of the Congress' desire to hold federal programs accountable for their actual performance (not the good intentions or the process measures that can easily distract decision-makers). The Results Act's implementation has triggered a quiet but fundamental change in the way Washington is making decisions. The Results Act has provided the Congress with the tools needed to comprehensively evaluate federal programs to determine what's working, what's wasted, what needs to be improved and what needs to be rethought. Pursuant to this law, existing federal programs are designing five- year strategic plans, annual performance plans and annual performance reports.

The Results Act calls for objective, reliable data to define and measure program performance and it seeks to hold programs and managers accountable for performance. This may be a novel concept for the federal government; but states and local governments are increasingly using performance measures to ensure taxpayer money is wisely used.

As a colleague of mine said, "While the Results Act does not generate immediate excitement, it will - if properly administered - deliver the most significant level of government accountability for tax dollars in American history. For the first time, taxpayers will know how federal agencies are spending their money, which of them are doing it effectively and which of them are wasting taxpayers' money." Performance- based government, a non-partisan initiative, is about restoring Americans' trust in government based on the results of government programs.

LSC has chosen to abide by the Results Act and be accountable for its performance using the same reporting mechanisms that other federal agencies have imposed upon them.

Congress Must Respond when Data is Misleading or Inaccurate

Two things can render the move towards performance- based governance null and void. First, the Results Act is useless unless Congress can rely on the information it is provided. Without a doubt, there is an early indication that data reliability is not only a problem at LSC. The General Accounting Office recently issued a report saying that said that 20 of the largest 24 federal agencies expect to have problems verifying their performance data to the Congress next year when the Results Act requires a Performance Report in March of 2000.

And second, the Results Act will be completely ineffectual if Congress provides increased money to non-performing agencies. If Congress does nothing in the face of poor or misleading performance, cynicism is likely to increase and the opportunity to restore public trust will be missed.

So, whereas LSC's misleading performance data is only the beginning of many data problems likely to present themselves to Congress, many are watching Congress's handling of LSC as an early testcase of whether all agencies need to take their own performance seriously or not.

Now that the facts are clear, the ball is in Congress's court. What is to be done now that LSC has been caught misleading the Congress about what it is doing with taxpayer dollars?

Summary

No one would deny that the less privileged in our society benefit significantly from legal assistance. But it is entirely unacceptable for Congress, the states or private entities to continue to provide funding to LSC programs without having credible and accurate information on how current funds are being spent. Just as you or I would alter our donations to a charity if we learned the charity had misrepresented its activities in its annual report, so too should Congress be equally vigilant with taxpayer dollars in the face of gross overstatements by an entity entrusted to serve the poor.

Thank you for your time and attention. I look forward to any questions you may have for me.

Written Testimony

TIME FOR CONGRESS TO HOLD THE LEGAL SERVICES CORPORATION ACCOUNTABLE

VIRGINIA L. THOMAS

Thank you for holding this oversight hearing on the Legal Services Corporation (LSC), Mr. Chairman. With your permission, I will make only a short oral statement and would ask that my entire statement be entered into the record. I must stress , however, that the views I express are entirely my own, and should not be construed as representing any official position of The Heritage Foundation.

The Legal Services Corporation (LSC) is a federally funded agency with 269 grantee offices around the country that have provided over $6 billion of free legal aid to the eligible poor since 1974. For fiscal year (FY) 2000, the LSC is requesting a $40 million increase, to bring its funding level to $340 million. This represents about a 13 percent increase in agency funding at a time when the U.S. General Accounting Office (GAO), the LSC's own inspector general, and the press have uncovered serious problems with the agency's case reporting statistics and performance numbers. Audits of the LSC's 1997 caseload data for 11 grantee offices--which reported handling 370,000 cases--determined that only 198,000 were valid. (1)

Until Congress receives accurate information about the performance of the Legal Services Corporation's grantees, it cannot hold the agency accountable for its performance and its use of taxpayer dollars. Congress should demand that all LSC programs supply timely and accurate data on program performance; it also should require independent audits and conduct investigative hearings. In addition, Members of Congress should ask whether it is even appropriate for the federal government to be funding this program. If it is not, they should consider closing down the LSC by transferring its funding to the Department of Justice, with a strict formula for block granting those funds to the states based on the number of poor in each jurisdiction. The responsibility for providing legal services to the poor belongs more appropriately to state and local officials and to private-sector institutions--those closest to the people in need of assistance.

THE TROUBLE WITH THE LSC'S NUMBERS

The LSC Factbook is a benchmark of LSC performance figures not only for Congress, but for states and private funding sources as well. In its 1998 Factbook, (2) the most recent issue available to Congress, the LSC reported that a total of 1,932,613 poor people were aided. (3) (See the Appendix for the 1998 Factbook's 1997 case statistics for specific congressional districts.)

After egregious errors in the 1998 Factbook numbers were reported in the press, however, the LSC was compelled to admit that it had not served as many clients as it had reported. An April 1999 LSC press release noted 400,000 fewer cases closed in 1997 than were reported in the 1998 Factbook.(4) The agency also amended its 1998 projections, revising them downward. The LSC soon will deliver its 1998 data to Congress in the 1999 Factbook. Until additional audits are completed, no one can know with any certainty what the agency has accomplished with the taxpayer dollars that Congress has appropriated in the past.

The LSC's representation of its open and closed cases is important, because it is the only tangible information currently available to Congress on the agency's overall performance. Until this year, Congress has never seriously questioned the accuracy of LSC's numbers.

As Congress considers funding for the LSC within the Commerce, Justice, State, the Judiciary, and Related Agencies appropriation bill, it should seek credible, factual performance information that justifies the Administration's substantial budget request, especially in light of the LSC's previous misreporting of data.

The Search for Accurate Performance Information

Congress relies increasingly on performance measures, such as the number of clients served by the Legal Services Corporation, to decide whether funding for the agency's programs should be increased or decreased. Congress should specify better performance measures that would include credible data on the quality, and not simply the quantity, of the services the LSC provides to the poor. Indeed, Members of Congress--especially appropriators--look at the performance of programs to determine whether a program is working efficiently and achieving its goals. As Representative Harold Rogers (R-KY), Cchairman of the House Appropriations Subcommittee on the Departments of Commerce, Justice, and State, the Judiciary, and Related Agencies, told the LSC in March 1999, "We want accurate information.... We do make our judgments based on the volume of the load that is represented to us." (5)

In December 1998, the Congressional Research Service (CRS) produced a study that examined the extent to which the past two Congresses had used the 1993 Government Performance and Results Act, a tool for measuring the success or failure of government programs and holding agencies accountable for their use of taxpayer funds. The study, requested by House Government Reform and Oversight Committee Chairman Dan Burton (R-IN), examined provisions in public laws enacted during the 104th and 105th Congresses. According to the CRS:

There are...indications that committees are interested in using performance-related information in the appropriations process and associated budget documentation. Over a third of all the committee reports identified in [our study] contained provisions linking performance measures and the budget process. Such provisions either stated the intent of the committee to consider the agency's progress in articulating outcome goals and measures during the appropriations process, suggested that the agency's budget submission include Results Act-related information and measures, or referred to realignment of program and budget structures in an agency's budget submission.... In addition, many reports included language that noted that future funding for an activity or program would be contingent upon establishing goals and measures or upon future performance against established goals. (6)

Even the LSC recognizes the linkage between performance and funding. Its president stated recently that

Case statistics play an essential role in the budget request and performance plan submitted by LSC to the United States Congress each year. Therefore, the reliability of case statistics submitted by programs to LSC is vital to obtaining continued Federal funding for Legal Services.... We believe this type of information...holds great promise for securing increased federal funding for legal services. (7)

Congress appears to base its funding of the Legal Services Corporation on the agency's reported caseloads. The LSC then distributes the money to grantees based on a formula that takes local poverty statistics into account.

ACCOUNTABILITY VS. SPIN CONTROL

As a key funding source and manager of taxpayer dollars, Congress must have access to trustworthy LSC data about caseloads, clients, and agency operations. If the LSC cannot provide dependable information on even the quantity of cases handled by its offices, there is little hope that Congress can obtain more sophisticated and meaningful quality performance information on this government service.

The demand for accountability pressures government officials to define and then demonstrate their performance, particularly when programs are seriously deficient. As one former LSC employee recently lamented, for example:

For more than 20 years I worked at a small Legal Services Corporation-funded program and the work was immensely rewarding. But in 1996, when I was the program's litigation director, I quit due to the many practices and policies which, to my mind, had all but destroyed the program's ability to render competent legal assistance to people unable to afford counsel. One of these practices was the counting of virtually every telephone call as a "case" in order to build up numbers to report to LSC and other funding sources. Consequently, hundreds if not thousands, of reported cases were nothing more than referrals or other responses given by paralegals or secretaries. (8)

The LSC chose to use case statistics as a measure of its performance. On February 25, 1998, for example, LSC President John McKay testified:

For FY 1999, LSC seeks an appropriation of $340 million. We estimate that this amount will enable local legal services programs funded by LSC to resolve over 1.6 million cases involving critical legal problems for eligible clients and their families.... Because of limited resources, local programs are forced to turn away tens of thousands of people with critical legal needs. (9)

Although Congress did not know about the caseload reporting problems, appropriators approved a $17 million increase for the LSC on October 21, 1998, bringing its FY 1999 budget to $300 million. Congress provided the funding with an expectation that the additional money would enable the LSC to serve 1.6 million clients in calendar year 1998. According to the LSC president, this new funding

represents the strong bipartisan backing that LSC has developed, and signals a renewed confidence that LSC is carrying out the will of Congress and is a vital part of the justice system. The increase will allow LSC-funded programs to serve a greater number of poor and disadvantaged clients more effectively in 1999. (10)

Uncovering the LSC's Reporting Problems

Concerns about the LSC's misrepresentation of its actual caseloads began to build after the agency's inspector general began in March 1999 to release the results of several audits. Since the IG has a dual reporting responsibility--both to the LSC Board and to Congress--the IG should have informed Congress of the seriousness of the errors found in the data. For example, of 149,589 cases reported for 1997 by six grantee offices, two-thirds were found to be invalid (see Table 1).

he inspector general's findings include the following examples, among others:

The Legal Aid Society of San Diego claimed it closed 33,096 cases for 1997, but the IG audit revealed that only 10,787 of these cases were legitimate. (11)

Florida Rural Legal Services admitted in August 1998 that 39,471 of the cases it reported were invalid. This reduced the actual number of legitimately reportable cases to 13,922 out of 53,393 reported. (12)

Legal Services of Miami claimed to have closed 23,800 cases in 1997; only 7,607 were found to be valid. (13)

Of the 16,490 cases reported by the San Francisco Neighborhood Legal Assistance Foundation, only 4,134 were valid; the program's director submitted a revision when the increased scrutiny of caseload data began. (14)

The Houston office reported 13,695 cases, but in a preliminary report yet to be finalized and released by the IG, only 9,995 potentially were valid. (16)

WHY THE LSC'S PERFORMANCE NUMBERS WERE FLAWED

The reporting problems found in every program audited by the LSC's own inspector general and the U.S. General Accounting Office since the 1997 case statistics were reported raise concerns about systemic LSC performance deficiencies and reporting abilities. According to the IG (17) and GAO (18) audits, LSC performance numbers included:

Repeat reporting of old "open" cases; Phantom or non-existent cases; Telephone contacts reported as cases when eligibility was not determined and the applicant was not accepted into the program; Inclusion of non-LSC-funded cases in reports; and Double counting of cases.

Upon learning of the inspector general's preliminary audits, newspapers and editorial pages began to report on the LSC's problems. On April 8, 1999, for example, the Associated Press released a story documenting the problems that the IG had begun to acknowledge in March 1999. The news story indicated that some Members of Congress were concerned that the LSC might have misrepresented the number of cases it handled intentionally in order to secure additional funding. (19) Following the AP story, several editorials in newspapers across the country criticized the LSC for its errors.

On March 3, 1999, during an annual appropriations oversight hearing, Representative Tom Latham (R-IA) began to ask questions about the LSC's veracity in reporting its caseload. The hearing was significant not only because it was the first time that LSC's numbers had been challenged by a Member of Congress, but also because it established clearly the committee's interest in linking the budget request to the agency's performance. In a follow-up written response to Latham's questions, the LSC's IG admitted that the agency's reported caseload figures are used for the annual budget request submitted to Congress.(20) This admission heightened concerns in Congress and eventually precipitated a congressionally requested GAO audit of LSC grantees.

GAO Confirms Serious Data Problems

On May 3, 1999, five Members of Congress 21 asked the U.S. General Accounting Office to continue to conduct random audits of LSC programs to collect additional facts before this year's allocation of tax dollars to the LSC. Congress asked the GAO to provide preliminary results of audits on five grantees by June. (21) On June 25, 1999, the GAO reported that all five grantees audited had problems accurately reporting the number of cases handled. This reinforced the findings of the IG's own audits.

As Table 2 shows, the grantees overreported closed cases, and four of the five grantees overreported open cases. The operations of all five grantees included cases in which the eligibility of clients was not verifiable. In addition, the GAO reported that four of the five offices reported closed cases in which no activity had occurred during the past year, and five reported open cases where no activity had occurred during the past year. (22)

Clearly, the LSC's reported caseload figures did not stand up to independent review and auditing.

THE LSC'S RESPONSES TO THE FINDINGS

Officials of the LSC, including the agency's president, were aware of the grantee reporting errors months before Congress was informed. In the summer of 1998, the LSC's president was informed of the audit findings of case reporting problems. (23) In September 1998, the inspector general informed some of his staff that "the numbers provided to Congress were inaccurate." The LSC, however, did not plan to release this information until March 2000, when its first Performance Report under the 1993 Government Performance and Results Act is due. (24)

By late 1998, the LSC should have viewed the audit findings as serious enough to bring to Congress' the attentionon of Congress, especially since Congress at the time was debating whether to increase LSC funding for FY 1999 by $17 million. The IG, knowing that the LSC did not plan to inform Congress of significant errors in its reported data, should have informed Congress of what the auditors were finding. Instead, the semiannual report issued by the inspector general on September 30, 1998, reported "no significant problems, abuses or discrepancies" in LSC programs. (25)

At a recent public debate at The Heritage Foundation, LSC President John McKay admitted that his inspector general had advised him of the seriousness of the reporting problems in the summer of 1998:

Our Inspector General is here in the audience, and I would hesitate to speak for him, but it was very clear that, based on the strength of oral advice, from him to me, beginning actually in the summer of 1998, that we [the LSC] had a problem concerning the accuracy of the cases. (26)

Why this serious problem was not reported to Congress is the heart of the issue. Indeed, in April 1999, the LSC revised downward its public estimates of the numbers of clients served in 1997 using taxpayer dollars, (27) even though it was asking all grantee offices to increase the types of cases they report for the next Factbook. (28)

The LSC sent new guidance to all grantees to modify future methods for reporting cases. (29) One of the many changes required would have the effect of helping each program to report more cases. This subtle yet important change requires each LSC program to report cases on which it has worked regardless of funding sources. Since 40 percent of the funding for most LSC grantees typically comes from non-federal sources--states, bar associations, or other private or public sources--this change not only will have the effect of inflating some of the future caseload numbers, but also will make it difficult to compare data relating to LSC's performance.

In May 1999, following congressional inquiries and the April AP story, the LSC sent out another letter advising all grantees that, among other things, a GAO audit was underway concerning the data they already had reported for 1997. (30) It asked program directors to affix their signatures attesting to the accuracy of their case statistics for 1998 because these figures would be compiled for the 1999 Factbook (which, because the LSC Factbooks typically are published in May of each year, is now overdue).

Unacceptable Excuses

Official denials of systemic reporting problems by the LSC have involved the following claims: (31)

LSC CLAIM #1: The scope of the problem is overstated; only five grantees overstated their cases, which is less than 3 percent of the LSC's caseload.

FACT: Each of the 11 LSC programs reviewed by an independent auditor--either the LSC's inspector general or the GAO--showed false case reporting problems. Specifically, the IG identified problems at Northern Virginia, Houston, San Diego, Miami, Florida Rural, and San Francisco. (32) The LSC self-identified similar problems at Alameda, Central Michigan, Los Angeles, and Western Carolina. Of 25 randomly selected cases audited at Farm Workers Legal Services of North Carolina, nearly all lacked data critical to determining whether the clients helped were indeed eligible for federal aid. (33) The GAO reviewed five additional programs, each one of which involved similar errors. (34)

LSC CLAIM #2: If anything, the LSC is underreporting its caseload.

FACT: Because each new review of the LSC's 1997 data reveals broad miscounting and overreporting, all numbers provided by the LSC are now viewed with skepticism. The LSC has taken steps to change the method for developing caseload estimates for Congress by asking offices to increase the types of cases handled, even if they are not funded by federal tax dollars. This will make annual comparisons of LSC caseload data, as well as performance measures for federally funded programs, nearly impossible.

LSC CLAIM #3: There is no evidence of fraud.

FACT: The LSC has not engaged in candid self-disclosure of problems with its 1997 case statistics. The gap in time between when the IG and the LSC leadership learned there was a problem and when Congress was advised of that problem is unacceptable. Moreover, the LSC's request for a $40 million increase in its FY 2000 budget--based on the same overinflated estimates from the disputed 1997 case statistics, and after LSC's president had been informed of the problem--is itself nothing short of fraudulent.

LSC CLAIM #4: The Inspector General Act prevents the IG from informing Congress before his semiannual report is due.

FACT: Nothing prevents the LSC or its IG from advising Congress of discrepancies found in data used to award taxpayer funding. In fact, compliance with the 1994 Government Auditing Standards requires the IG to advise Congress and management whenever there is a need for timely reports. (35) These standards encourage interim or oral reports to stimulate, not stymie, information flowing to policymakers.

LSC CLAIM #5: The LSC itself uncovered the problem through self-initiated audits, brought it to Congress's attention, and took steps to correct it.

FACT: The timeline shows that the LSC and its own inspector general knew of the emerging case reporting problems and did nothing to inform Congress. In late 1998, Congress voted an increase in federal funding for the LSC by relying on information the LSC knew to be false, and on its exaggerated claims of its performance. As late as March 1999, the LSC was still using these unreliable data in its requests for additional funds from Congress.

LSC CLAIM #6: Case numbers and performance information have no bearing on funding levels. Specific allocations are based on the eligible populations living in each service area, not on the number of cases handled or referred. Therefore, there is no incentive to inflate numbers.

FACT: The LSC, Congress, and even LSC grantees use performance or caseload numbers to influence funding from federal and non-federal sources. The agency's own five-year strategic plan for 1997-2002 established as an annual goal "[to] seek to provide high-quality legal services to the greatest number of eligible clients that our appropriation will support." (36) According to the LSC's president:

Case statistics play an essential role in the budget request and performance plan submitted by LSC to...Congress each year. Therefore, the reliability of case statistics submitted by programs to LSC is vital to obtaining continued Federal funding for Legal Services.... [T]his type of information...holds great promise for securing increased Federal funding.... (37)

Moreover, inaccurate case numbers from the LSC can:

Attract additional non-federal funding (in 1997, over $200 million in revenue came from non-federal funding); sSkew evaluations for various competitive grants; dDiscourage competition from more cost-effective providers of legal services; and mMislead Congress and the public into believing that the LSC is performing better than is actually the case.

WHAT CONGRESS SHOULD DO

No one denies that the less privileged in society benefit significantly from free legal assistance. However, the LSC services only about 5 percent of the eligible poor. The lives of thousands of people have been improved by the efforts of pro bono attorneys and the ad hoc network of organizations and people, such as private foundations, churches, and synagogues, that have stepped up to assist the poor when they are in need. Unfortunately, however, the federal program to help the poor with legal assistance--the Legal Services Corporation--has shown itself to be deceptive in measuring its performance and impervious to efforts to institute accountability.

For this reason, the first question Congress should ask is whether the federal government should be running this program at all. If it is decided that providing legal services to the poor is not appropriately a federal function, Congress should consider devolving this responsibility to the states, local governments, and private-sector institutions and putting the LSC on a clear path toward eventual shutdown. (38)

To accomplish this, Congress should transfer funding for legal services for the poor to the Department of Justice, with a strict formula for block-granting funds to the states based on the number of poor in each jurisdiction. Block grants not only would eliminate federal overhead, but also would permit states to institute their own accounting standards for grantees and allow them to conduct their own audits. Recent strides in welfare caseload reduction at the state level--driven in large part by the autonomy of the states to design appropriate welfare-to-work transitioning programs--have emboldened Washington to return to the states the responsibility for other federal programs once thought too large or cumbersome for states to handle. Washington should acknowledge that state and local leaders who know best how to serve the legitimate and critical legal needs of the poor are in a better position to design the most efficient system and provide quality services to those in need.

Alternatively, if it is decided that the Legal Services Corporation does represent a proper federal function, Congress should establish the criteria for evaluating the LSC's performance, including case statistics. In the short term, Congress should:

1. Demand that the LSC issue its 1999 Factbook with 1998 caseload figures as soon as possible.Congress and the public need to review how the LSC has spent taxpayer money--and what, if anything, it has accomplished--before deciding how much (if anything) should be appropriated for FY 2000. The 1999 Factbook may not be published until late July, giving little time for appropriators to study changes from the disputed numbers in the 1998 Factbook.

What Members of Congress Should Ask in Oversight Hearings

What did the Legal Service Corporation, its board, and its inspector general know, and when did they know it? Why wasn't Congress informed as remedial steps were taken? Whose decision was it not to report data and performance problems to Congress immediately, or to consider waiting until March 2000 to inform Congress? For any given LSC grantee's reported caseload, how much is attributable to cases opened in 1996, 1995, 1994, 1993, 1992, or earlier? What is the status of the Houston audit, the findings of which were given to the inspector general last August but still have not been released? Who received the 1998 Factbook from the LSC and needs to be informed of its inaccuracies?

2.Verify the accuracy of information Congress receives from the LSC in the future. To ensure that federal tax dollars are not wasted and that those most in need are being helped, and to hold accountable those LSC officials who are responsible for providing inaccurate information to Congress, Congress should:

Require an annual independent audit of LSC case statistics, either by the GAO or by an outside contractor, to obtain a verifiable and accurate accounting of LSC performance. Audits should begin by verifying 1997 and 1998 data, since only 11 of the 269 grantee offices have been audited for their 1997 caseloads to date.

Prevent the LSC from administratively changing the definition of "reportable" cases to avoid accurate assessments of performance. The LSC's new administrative guidance to grantees in November 1998 will do just that. Congress should specify how it wishes the LSC to track federal funds and performance data.

Apply the Federal False Statements Act to the LSC and its grantees to prevent future misrepresentation of facts during the appropriations process. This act would allow penalties for misreporting data about caseloads or clients served with federal taxpayer dollars.

3. Reduce FY 2000 funding. Congress should reduce the LSC's annual appropriation, or make its funding contingent on the release of accurate data, to offset the overfunding provided in the past from LSC's provision of inaccurate data. Since federal funding is premised on delivery of services to a certain number of poor people and LSC's data have been questioned, federal funding should not be increased to the requested $340 million. Congress must send a strong message that deception will not be tolerated or rewarded with larger budgets.

4. Conduct new oversight hearings to determine what LSC officials knew and when they knew it.The information that comes to light in these hearings could set the stage for future legislative changes to ensure that such misreporting does not happen again. (39) Such hearings would establish a benchmark for LSC performance and would demonstrate that Congress is serious about performance data and the accuracy of the information upon which it bases appropriations.

5. Highlight the need for reform in each state. As further scrutiny of the LSC and its 269 grantees' caseload data continues, Members of Congress can encourage local oversight efforts by state legislatures and local media. In Virginia, for example, heightened press attention to the reporting errors in one LSC program triggered new reporting and oversight by the state legislature. (40)

CONCLUSION

In 1993, Congress passed and the President signed the Government Performance and Results Act with bipartisan support and the Clinton Administration's stamp of approval. The act codified Washington's desire to hold federal programs accountable for their performance and use of taxpayer dollars.

This law is useless, however, unless Congress can rely on the information provided by federal agencies. Until Congress receives accurate information about the performance of Legal Services Corporation grantees, it will continue to be unable to hold the LSC accountable. Congress should demand that all LSC programs supply timely and accurate data on program performance, and it should require independent audits and hold new investigative hearings to determine the reliability of information supplied by the LSC.

In the LSC's case especially, Members of Congress must be tenacious in seeking and obtaining the facts before spending more taxpayer dollars. The LSC's functions are carried out better and more appropriately by the states, localities, or private organizations. Until Congress can eliminate funding for this agency, however, enhanced congressional oversight is needed. With better information about the LSC's performance, Congress can assess the cost-effectiveness of the agency's delivery of services compared with other options to improve legal assistance to the poor.

APPENDICES

Legal Services Corporation Grantee Caseloads (A Column Has Been Included for 1998 Numbers When They Become Available), Source: Legal Services Corporation, Office of Inspector General, and Office of Information Management

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